How to save tax for salary above 20 lakhs

Salary earners making over Rs. 20 lakh in India may face a higher tax bracket. You can avail tax deductions such as ELSS, EPF, Home loan payment and many more to your save tax.
How to save tax for salary above 20 lakhs
3 min

Filing your income tax return every year is one of the most important things you can do to ensure you fulfil your tax liability. The Indian government has set numerous rules and guidelines under the Income Tax Act of 1961 that provide all the information you need to know to file your ITR effectively. The tax amount you end up paying every year increases with the salary. If you have a higher salary, your tax liability will be higher.

However, you can save tax in numerous ways if your salary is Rs. 20 lakh. Saving taxes on a Rs. 20 lakh salary will help you avoid paying additional taxes. In this blog, you will understand how to save tax for a salary above Rs. 20 lakh to ensure you increase your savings for a better financial future.

Latest update on the new tax regime

The Indian government introduced the Finance Act 2023, which made the new tax regime the default tax regime with effect from the assessment year 2024-25. The new rules came after the Finance Act amended the previous provisions under section 115BAC. The new tax regime has been made the default tax regime for assesses such as individuals, HUFs, associations of persons (AOPs), bodies of individuals (BOIs), and artificial juridical persons.

However, taxpayers still have the option to opt out of the default new tax regime and choose the old tax regime for ITR filing. Here are some of the main updates on the new tax regime:

  • For ‘non-business cases’, the taxpayers have the option to choose a different regime every year under section 139(1).
  • If a taxpayer has income from business and profession and wants to choose the new tax regime, the taxpayer must furnish Form 10-IEA.

Tax saving options above Rs. 20 lakhs salary - New tax regime

The new tax regime was introduced for taxpayers who wanted to avoid utilising extensive deductions and exemptions available in the old tax regime. Hence, there are limited tax saving options under the new tax regime for saving tax if your salary is above Rs. 20 lakh. Here are the tax-saving options:

Standard deduction

Basic deduction for salaried individuals

Section 80CCD(2)

Employer contribution to NPS

Section 80CCH

Investment made in Agniveer corpus

Section 57(iia)

Family pension received

Section 10(10C)

Voluntary retirement

Section 10(10)


Section 10(10AA)

Leave encashment

Section 24

Interest on a home loan on the let-out property 

Furthermore, some other deductions under the new regime are as follows:

  • Transport allowance is available if you are a specially-abled person.
  • A conveyance allowance is provided to cover the expenses incurred for travelling as part of the employment.

Also read about: Short Term Capital Gains Tax

Tax saving options above Rs. 20 lakhs salary - Old tax regime

The old tax regime is for taxpayers who want to decrease their tax liability by utilising a host of deductions and exemptions. Hence, there are numerous tax-saving options you can use to save tax on your Rs. 20 lakh salary. Here are the tax-saving options:

Section 80D - health insurance premium

Rs. 25,000 for self, spouse, and dependent children

Rs. 50,000 if above 60 years of age

Parents: Rs. 25,000 and Rs. 50,000 if above 60 years of age.

Section 80 E-education loan

Deduction for 8 years from the year of repayment of education loan taken for self, spouse, dependent children, or a student for whom the individual is a legal guardian.

Section 80G - donating to charity

50% of 100% of the donated amount for notified institutions.  

Section 80C investing in tax saving instruments

Tax benefits up to Rs. 1.5 lakh. Some investing options include:

  • Public Provident Fund (PPF)
  • Employees’ Provident Fund (EPF)
  • Equity Linked Saving Scheme funds (ELSS)
  • Home loan repayment and Stamp duty
  • Sukanya Smriddhi Yojana (SSY)
  • National Savings Certificate (NSC)
  • Fixed Deposit for 5 years and more

Section 80DD- costs to treat disabled dependents

If you bear the medical cost for disabled dependants, you are eligible for tax relief:

  • 40% disability: Rs. 75,000
  • 80% or severe disability: Rs. 1.25 lakh.

Home loan payments

Principal amount: Up to Rs. 1.5 lakh u/s 80C

Interest amount: Up to Rs. 2 lakh paid under section 24b

The maturity amount of a Life Insurance Policy

You can take a tax benefit on the maturity proceeds if the sum assured is less than:

  • 20% for policies issued before 1 April 2012
  • 10% for policies issued after 1 April 2012
  • 15% for policies issued after 1 April 2013 for a person with a disability.


Tax calculation under the new and old regimes

Tax calculation under the new and old tax regimes is done based on the income tax slabs that have been set by the Indian government for both regimes. Here are the income tax slabs for FY 24-25 based on which the tax calculation is done for both regimes:

Annual income

Old tax regime

New tax regime

Up to Rs. 2.5 lakh



Rs. 2.5 lakh - Rs. 5 lakh



Rs. 5 lakh - Rs. 7.5 lakh



Rs. 7.5 lakh - Rs. 10 lakh



Rs. 10 lakh - Rs. 12.5 lakh



Rs. 12.5 lakh - Rs. 15 lakh



Above Rs. 15 lakh




How to save tax on salary above 20 lakhs?

Here are the steps you can take to save tax on a salary above Rs. 20 lakh:

Make the most of section 80C

Section 80C is one of the best ways to save tax on your Rs. 20 lakh salary, as its full utilisation can help you lower your tax liability by Rs. 1.5 lakh. You can invest in various investment instruments such as the Public Provident Fund (PPF), Employee Provident Fund (EPF), National Savings Certificates (NSC), Equity-Linked Saving Schemes (ELSS), etc. Additionally, life insurance premiums and expenses like children's tuition fees and principal repayment on home loans also qualify for this deduction.

Rent out your house property

If you own a property, you can rent it out to claim tax benefits. Although the rental income is taxable as per your applicable tax slab, you can claim the entire interest on the home loan as a deduction without any upper limit under section 24. Furthermore, you can claim a standard deduction of 30% under section 24(a) on the net annual value of the rental income for maintenance, irrespective of the actual expenditure incurred.

Use the HRA exemption

Salaried employees living in a rented house can reduce their tax liability by claiming the rent allowance. The HRA exemption is the least of the following: the actual HRA received, 50% of the salary (basic plus DA) for those living in metro cities (40% for non-metros), or the actual rent paid minus 10% of the salary (basic plus DA). Salaried employees can claim HRA under section 10(13A) with Rule 2A.

Invest in National Pension Scheme (NPS)

The National Pension Scheme is a part of section 80C deductions, where you can use the investment in NPS as part of the Rs. 1.5 lakh section 80C limit. However, you can contribute to NPS to qualify for a deduction of up to Rs. 50,000 under section 80CCD(1B), over and above the Rs. 1.5 lakh limit under section 80C. This means you can effectively reduce your taxable income by an additional Rs. 50,000.

Claim tax deductions on education loans

Under Section 80E of the Income Tax Act, you can claim a deduction on the interest paid on education loans. This deduction is available for a maximum of eight years or until the interest is fully repaid, whichever is earlier. The loan can be for higher education for yourself, your spouse, or your children, and there is no upper limit on the amount you can claim as a deduction

Make use of the LTA exemption

You can lower your tax liability by claiming Leave Travel Allowance (LTA) under section 10(5) for travel expenses incurred within India in a block of four years. The current block for claiming LTA is between 2022 and 2025. The LTA exemption covers travel costs for the employee and their family but does not include other expenses such as food and accommodation.

Use the deduction for donations

You can donate money to specified funds, charitable institutions, and relief funds and claim the donated amount as a tax deduction under section 80G. The deduction limit can be 50% or 100%, depending on the type of donation without any upper limit.

Claim tax deduction for professional development

Under section 80E, you can claim deductions for expenses incurred for professional development. You can claim the deductions for interest on loans taken for higher education, including courses that enhance professional skills. There is no upper limit on the deduction amount you can claim under section 80E.

Also read about: Long Term Capital Gains Tax

Which regime is better for 20 lakh LPA to save tax?

Here is a side-by-side comparison of the old and the new tax regimes to understand which regime is better for Rs. 20 lakh LPA to save tax:

Particulars Old tax regime (in Rs.) New tax regime (In Rs.)
Gross salary Rs. 20,00,000 Rs. 20,00,000
Less: Standard deduction Rs. 50,000 Rs. 50,000
Net salary after standard deduction Rs. 19,50,000 Rs. 19,50,000
Section 80C Rs. 1,50,000 Not applicable
Section 80D Rs. 50,000 Not applicable
Section 24(b) Rs. 2,00,000 Not applicable
Section 80CCD(1B) Rs. 50,000 Not applicable
Total deductions Rs. 5,00,000 Rs. 50,000
Net taxable income Rs. 15,00,000 Rs. 19,50,000


Tax calculation Old tax regime (in Rs.) New tax regime (In Rs.)
Income up to Rs. 2.5 lakh NIL NIL
Income from Rs. 2.5 lakh - Rs. 5 lakh Rs. 12,500 Rs. 12,500
Income from Rs. 5 lakh - Rs. 7.5 lakh Rs. 50,000 Rs. 25,000
Income from Rs. 7.5 lakh - Rs. 10 lakh Rs. 50,000 Rs. 37,500
Income from Rs. 10 lakh - Rs. 12.5 lakh Rs. 75,000 Rs. 50,000
Income from Rs. 12.5 lakh - Rs. 15 lakh 75,000 62,500
Income from Rs. 15 lakh - Rs. 19.5 lakh Rs. 1,35,000 Rs. 1,35,000
Total tax payable Rs. 3,97,500 Rs. 3,72,500
Cess (4%) Rs. 15,900 Rs. 14,900
Total tax liability Rs. 4,13,400 Rs. 3,87,400

Here, you can see that because of lower tax slabs in the new regime, you end up paying lower taxes even when using various deductions available under the old tax regime.


If you have a salary of Rs. 20 lakh, you fall in the highest tax bracket in India, which can force you to pay a hefty amount in taxes. However, you can use various tax-saving instruments in the old regime or the lower tax slabs of the new tax regime to ensure you avoid paying additional taxes and increase your savings. Now that you know how to save tax for a salary above Rs. 20 lakh, you can ensure you save a higher amount.

You can consider investing in mutual funds if you want to multiply the amount saved by paying a lower tax. Visit the Bajaj Finserv Mutual Fund Platform and use unique tools such as mutual fund calculators to compare mutual funds and invest in the most suitable mutual fund schemes.

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Frequently asked questions

How much tax will be deducted for 20 lakhs salary?
The tax deducted from an Rs. 20 lakh salary depends on your chosen tax regime and the exemptions you claim. You can use various income tax calculators to calculate your tax liability based on the tax regime and claimed exemptions.
Which tax regime is better for 20 lakhs?
The new tax regime is considered better for Rs. 20 lakh salary as it has lower tax slabs, allowing you to pay a lower tax amount when compared to the old tax regime. However, it is wise to use an income tax calculator to determine which tax regime is better for you to pay a lower tax amount.
How to save tax on 20 LPA?
You can reduce your taxable income by utilising various exemptions and deductions available in the old tax regime under section 80C and others. On the other hand, you can opt for the new tax regime to utilise the lower tax slabs.
What tax slab applies to a salary above 20 lakhs?
Above a salary of Rs. 20 lakh, a 30% tax slab is applicable.
How can I reduce my taxable income if I earn above 20 lakhs?
You can utilise various exemptions and deductions available under the old tax regime or choose the new tax regime’s lower tax slabs to reduce your tax liability if you earn above Rs. 20 lakh.
Are there any tax benefits specific to high-income earners?
Although not specific to high-earners, they can use various additional tax deductions such as Rs. 50,000 NPS deduction over and above the Rs. 1.5 lakh deduction under section 80CCD(1B).
Can a home loan help save on taxes for someone earning more than 20 lakhs?
Yes, a home loan can help save taxes for someone earning more than Rs. 20 lakh by providing deductions under section 24(b) for the interest paid on loans up to Rs. 2 lakhs per year and under section 80C for the principal repayment up to Rs. 1.5 lakh per year.
Are there any tax-saving tips exclusively for senior executives who have salaries above 20 lakhs?

Senior citizens with salaries above Rs. 20 lakh can consider tax-saving options such as deductions under section 80C, utilising perks like HRA and LTA efficiently, and considering tax-saving investment avenues like NPS Tier-1 contributions.

Which is the best tax-saving investment for an income earner above 20 lakhs and in the 30% tax slab?

For individuals earning above Rs. 20 lakh and falling in the 30% tax slab, Equity Linked Savings Schemes (ELSS) is considered as the best tax-saving investment. ELSS investments qualify for a tax deduction of up to Rs. 1.5 lakh under section 80C.

Is 20 lakh a good salary in India?

Yes, a salary of 20 lakh per annum is considered quite good in India. It provides a comfortable standard of living, allowing for savings, investments, and a decent lifestyle, especially in cities with a moderate cost of living. However, the perception of its adequacy can vary based on personal circumstances and location.

How much tax will be deducted for 20 lakh salary?

For a 20 lakh annual salary in India, the income tax liability depends on various factors like deductions and exemptions. Typically, without considering exemptions, the tax would be approximately ₹3.37 lakh under the old regime and around ₹2.60 lakh under the new regime for the financial year 2023-24.

How many Indians earn 20 lakhs per year?

Earning an annual salary of 20 lakh places an individual among the higher income earners in India. Approximately 2-3% of the Indian population earns this much or more, highlighting the disparity in income distribution within the country.

What is the top 1% salary in India?

The top 1% of earners in India typically have salaries exceeding ₹50 lakh per annum. This threshold reflects the significant income inequality present in the country, where a small fraction of the population controls a large portion of the total income.

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The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

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